Senate Dems seek to extend tax cut

Senate Democrats are set this week to push for an expansion of the current payroll tax cut – and pay for it by tacking on an extra tax for millionaires.

Senate Majority Leader Harry Reid (D-Nev.) announced Monday that the upper chamber will vote on a bill that would expand the payroll tax holiday – a move intended to pump more cash into consumers’ pockets and give a jolt to the still-weak economy. It would be paid for by a 3.25 percent surtax on income over $1 million, he said.

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“If [Republicans] choose to oppose this payroll tax cut, we’ll know what they meant to say was, we can’t afford to raise taxes on the rich,” Reid said on the Senate floor. “In fact, more clearly, we cannot afford to raise taxes on the rich, but we’re happy to raise taxes on the middle class.”

The Senate has repeatedly rejected efforts to pay for economic measures via a millionaires’ surtax, including the entirety of President Barack Obama’s jobs package and smaller proposals intended to help teachers and first responders and rebuild the nation’s aging infrastructure. In all instances, Senate Republicans – as well as a few moderate Democrats – denied the Senate Democratic majority the 60 votes needed to proceed on the measures.

In the House, Speaker John Boehner (R-Ohio) said last week he would be open to discussing an extension of the payroll tax cut with Obama. But the addition of the millionaires’ surtax to pay for the estimated $265 billion proposal makes it unlikelier that it would gain support from congressional Republicans.

“Republicans have said that extending the payroll tax break is a potential area of common ground, but coupling it with a job-killing tax hike on small businesses makes no sense whatsoever,” Boehner spokesman Michael Steel said in an email to reporters. “It looks like Washington Democrats are playing politics with American jobs – again.”

Perhaps acknowledging that the legislation with the surtax attached is unlikely to clear the Senate, Reid told reporters that he would bring up a payroll tax cut extension “at least two, or maybe three, times” should it fail at first.

Democrats estimate their proposal, which would slice the payroll tax cut in half from 6.2 percent to 3.1 percent, would save the average U.S. family $1,500 a year. Authored by Sen. Bob Casey (D-Pa.), the bill also cuts payroll taxes for employers and gives incentives for businesses to boost their payrolls.

The payroll tax holiday extension has been a top priority for Obama, who has traveled the country in recent days to try to drum up public support for it. In Manchester, N.H., last week, he hit Republicans for opposing tax increases in general but supporting a payroll tax cut extension.

For instance, Senate Minority Whip Jon Kyl of Arizona, the second-ranking Senate Republican, said Sunday that he would oppose extending the payroll tax holiday, arguing that the tax cut hasn’t helped create jobs and would hurt funding for Social Security.

Reid, during a conference call with reporters on Monday, denied the payroll tax cut would make the program insolvent since the bill would require transfers from the general fund to the Social Security fund.

The payroll tax cut holiday, which lowered rates to 4.2 percent, is set to expire at year’s end. Action on that is one of the top legislative priorities that Congress faces in December, along with extending unemployment insurance, funding the government and preventing cuts to Medicare payments for doctors.

CORRECTION: The total cost of extending the payroll tax cut is estimated to be $265 billion.